Talking Point 

How a Trump presidency will affect your clients

  • To learn what Mr Trump's policies are.
  • To understand which sectors and which type of companies can outperform.
  • To grasp the effect of US policies on various asset classes
CPD
30min
How a Trump presidency will affect your clients

Volatile share prices and a rush to safe haven assets such as gold gave a good indication of what markets thought about Donald Trump in the run up to the US presidential election.

On the few occasions when polls showed the Republican candidate having a credible chance of beating Hilary Clinton, stock markets more often than not got battered.

The real estate developer’s aggressive rhetoric on Mexicans, Muslims, global warming, crony capitalism, intrusive global governments and abortion, to name a few, counteracted the stability usually demanded by markets.

That he had no political or military experience only increased speculation that a Mr Trump win would destroy the global economy.

That stark warning clearly played on the mind of investors when news first broke that his controversial views convinced enough frustrated North Americans to ignore the mainstream media’s threats and vote for him anyway. It didn’t last long, though.

After the initial shock of Mr Trump's victory set in, markets began to behave just as they had following the equally unexpected Brexit vote.

Within hours of being confirmed as the president-elect, traders went from worrying about the bad things Mr Trump promised to focusing on the potential good stuff.

That his fiscal heavy policies and business expertise may actually boost economic growth and stock markets suddenly became the main talking point.

Equities buoyed by vow to end fiscal restraint 

Pledges to expand infrastructure and defence spending, cut red tape and slash corporation tax by 20 percentage points to 15 per cent attracted most of the positive attention.

By drastically reducing the amount companies pay on income and investing in various domestic projects, stretched profit margins and revenues could be lifted throughout various industries.

Recognition of that potential sent equity investors across the globe on a spending spree.

By the end of a day that started so gloomy, the Dow Jones Industrial index, which is home to the country’s most influential names and widely considered to be a bellwether of US equity appetite, closed in on an all-time high.

Unsurprisingly, portfolios were mainly repositioned to take into account the various things that Mr Trump said during his campaign. That meant that defence, oil and gas and infrastructure-exposed companies, from copper miners to construction firms, were the main beneficiaries of the vote. 

Companies incurring most of their costs in the depreciating peso currency similarly soared, as did the pharmaceutical stocks that Hilary Clinton pledged to punish for overcharging on prescription drugs.

Naturally, there were also plenty of names that fell on the wrong side of sentiment. The prospect of protectionist trade policies, and a wall separating Mexico and North America, punished multinational companies reliant on global trade, specifically those operating just south of the border.

Those falling foul of Mr Trump’s indifference to global warming concerns, such as renewable energy firms, similarly got hammered.

CPD
30min
  1. What does Mr Trump want to slash corporation tax to?

  2. What is widely considered to be a bellwether of US equity appetite?

  3. What does Mr Trump believes creates a "false economy"?

  4. How much has the Dow Jones fallen by during the first year of a Republican presidency since 1945?

  5. According to Mr Liberto, what could continue to yo-yo until Mr Trump is settled in the White House?

  6. Mr Green believes what can cause panic-selling and mispricing?

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